All the three institutions -- Industrial Development Bank of India (IDBI), ICICI Ltd and Industrial Finance Corporation of India (IFCI) -- effected a half a percentage point (50 basis points) cut in their prime lending rate (PLR) bringing it down to an identical 13.5 per cent (exclusive of interest tax). IDBI and IFCI's minimum term lending rates (MTLR) are equivalent to ICICI's long-term prime rate (LTPR) -- for loans beyond three years.

IDBI and IFCI have made their new rate effective immediately, while ICICI has made it from Thursday (March 18). Both IDBI and IFCI have reduced their short term prime rate by 50 basis points to 12.5 per cent while the ICICI has revised it to 13 per cent.

ICICI's medium term prime rate (MTPR), applicable to loans for a period of more than one year and up tothree years, is also now pegged at 13 per cent. Neither IDBI nor IFCI has the concept of MTPR. The institutions have retained the maximum band of 3.5 per cent for each category of lending.

The reduction has been effected, consequent to the RBI reducing the bank rate by 100 basis points, said all the three institutions' released issued on Wednesday. Following the reductions in bank, repo rate and CRR, interest rates have shown a downward trend, the institutions added.

As a result of the recent budgetary initiatives taken by the ministry of Finance and the subsequent announcements by the RBI, ICICI's borrowing costs are expected to decline moderately, said the ICICI release. "We watched the market closely. On an average the interest rates have gone down by 50 basis points. We have decided to pass the benefit to the corporates," an ICICI executive said.

The State Bank of India and Bank of India took the lead in cutting the prime lending rates. Within hours of RBI announcement of rate cuts on March 1, boththe public sector banks slashed their PLR by one percentage point to 12 per cent. Bank of Baroda, Union Bank, Corporation Bank and Dena Bank followed suit by bringing down their PLRs between 12 per cent and 12.75 per cent. Most of public sector banks have also slashed their deposit rates.

However, the foreign banks and private sector banks have preferred to adopt a wait and watch policy. IDBI Bank was the first among the new private banks to cut its PLR while no foreign bank has taken the plunge yet. Senior bankers said another round of CRR cut which will infuse sufficient liquidity into the system will prompt these banks to cut their lending rates.

The overnight call rates have been ruling over 10 per cent despite the 50 basis points CRR cut which infused over Rs 3400 crore. The advance tax outflow and aggressive open market operations by the RBI have sucked out the liquidity, bankers said.

Meanwhile, it is learnt that financial institutions are divided over a key corporate governance issue: whethercorporates should publish a "directors' responsibility statement" (DRS) in the annual accounts or not. While IDBI and GIC have rejected the recommendation made by the working group in its report on the Companies Act, 1956, in regard to the DRS, LIC, UTI and IFCI have favoured the suggestion. FIs have intimated their stand recently to the finance ministry.